Patterson-UTI Energy Reports Financial Results for Three and Twelve Months Ended December 31, 2017

Transcription

1 NEWS RELEASE Patterson-UTI Energy Reports Financial Results for Three and Twelve Months Ended December 31, /8/2018 HOUSTON, Feb. 8, 2018 /PRNewswire/ -- PATTERSON-UTI ENERGY, INC. (NASDAQ: PTEN) today reported financial results for the three and twelve months ended December 31, The Company reported net income of $195 million, or $0.88 per share, for the fourth quarter of 2017, compared to a net loss of $78.1 million, or $0.53 per share, for the quarter ended December 31, Revenues for the fourth quarter of 2017 were $787 million, compared to $247 million for the fourth quarter of For the year ended December 31, 2017, the Company reported net income of $5.9 million, or $0.03 per share, compared to a net loss of $319 million, or $2.18 per share, for the year ended December 31, Revenues for the year ended December 31, 2017 were $2.4 billion, compared to $916 million for The financial results for the fourth quarter of 2017 include net after-tax items of $218 million, or $0.98 per share. These items include a benefit of $219 million, or $0.99 per share, related to a non-cash revaluation of deferred tax items arising from lower corporate tax rates as part of recent tax legislation, $8.7 million of pre-tax merger and integration expenses ($6.4 million after-tax, or $0.03 per share), and an $8.4 million pre-tax gain ($6.2 million aftertax, or $0.03 per share) related to the sale of certain oil and gas properties. Excluding these items, the net loss per share for the quarter would have been $0.10. Financial results for the year ended December 31, 2017 include the aforementioned adjustment to the deferred tax items, as well as merger and integration expenses totaling $74.4 million pre-tax, a non-cash impairment charge totaling $29.0 million and gains from the sale of certain real estate and oil and gas interests totaling $19.6 million. Excluding these items, the net loss per share for the year ended December 31, 2017 would have been $0.80. Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "Before reviewing the financial results, I want to 1

2 express again that all of us at Patterson-UTI are mourning those who lost their lives in the tragic accident in Oklahoma. There is nothing more important to us than the safety of our employees and others we partner with in the field." Mr. Hendricks added, "Turning to the fourth quarter, despite widespread concerns for lower industry drilling activity, our rig count rebounded through the quarter. Even with the typical holiday slowdown in Canada, our rig count at the end of the year was near the highest level of Our average rig count for the fourth quarter was unchanged relative to the third quarter at 161 rigs. For the month of January 2018 our average rig count was 165. "Average rig margin per day for the fourth quarter increased $280 sequentially to $8,010, as a $630 increase in average rig revenue per day offset a $350 increase in average rig operating costs per day. Average rig revenue per day of $20,950 was better than expected, as the market for super-spec rigs remains tight. Average rig operating costs per day increased, as expected, to $12,940 from an unusually low level in the third quarter. "We completed all seven of the previously announced rig upgrades to APEX-XK, and continue to see strong demand for super-spec rigs. As such, we now have customer contracts to support the upgrade of five additional APEX rigs - two to become APEX-XK rigs and three to become APEX-PK rigs. These five upgraded rigs are expected to be delivered in the first half of "As of December 31, 2017, we had term contracts for drilling rigs providing for approximately $540 million of future dayrate drilling revenue, an increase from $470 million at September 30, Based on contracts currently in place, we expect an average of 96 rigs operating under term contracts during the first quarter, and an average of 67 rigs operating under term contracts during "In pressure pumping, revenues increased 12% sequentially to $407 million for the fourth quarter. Gross margin as a percentage of revenues increased to 20.4% for the fourth quarter from 19.9% for the third quarter. "Late in the fourth quarter we reactivated one additional frac spread, and ended the year with 1.25 million horsepower active, comprising 23 frac spreads. For 2018 we have several initiatives underway by which to benefit from the expected strength in the pressure pumping market. These initiatives include optimizing our average spread size to gain an extra active spread from already active equipment, relocating a couple spreads out of the Mid-Continent to more profitable markets, and reactivating additional idle frac spreads. "On October 11, 2017, we completed the acquisition of MS Directional, a leading U.S. directional drilling services company. As such, financial results for the fourth quarter include 81 days of post-acquisition contribution. Directional drilling revenues totaled $45.6 million and gross margin as a percentage of revenues was 29.4%." 2

3 Mark S. Siegel, Chairman of Patterson-UTI, stated, "Looking back on 2017, it was a transformational year for Patterson-UTI. We both strengthened and diversified our company through strategic acquisitions that improved our scale in drilling and pressure pumping and added new services in directional drilling, oilfield rentals, and drilling technology. Patterson-UTI is the only company in the U.S. unconventional market with significant scale in drilling, pressure pumping, and directional drilling." Mr. Siegel, continued, "Our thoughts and prayers go out to all those affected by the tragic accident in Oklahoma and their loved ones. We would like to thank the first responders, emergency personnel, authorities and others for their tremendous courage and efforts as well as the local people in and around Quinton, Oklahoma, who dropped everything to offer support to those affected," he concluded. The Company declared a quarterly dividend on its common stock of $0.02 per share, to be paid on March 22, 2018, to holders of record as of March 8, All references to "per share" in this press release are diluted earnings per common share as defined within Accounting Standards Codification Topic 260. The Company's quarterly conference call to discuss the operating results for the quarter ended December 31, 2017, is scheduled for today, February 8, 2018, at 9:00 a.m. Central Time. The dial-in information for participants is (844) (Domestic) and (647) (International). The conference ID for both numbers is The call is also being webcast and can be accessed through the Investor Relations section at A replay of the conference call will be on the Company's website for two weeks. About Patterson-UTI Patterson-UTI is a provider of oilfield services and products to oil and natural gas exploration and production companies in North America, including market leading positions in contract drilling, pressure pumping and directional drilling services. For more information, visit Cautionary Statement Regarding Forward-Looking Statements This press release contains forward-looking statements which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Patterson-UTI's current beliefs, expectations or intentions regarding future events. Words such as "anticipate," "believe," "budgeted," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "potential," "project," "pursue," "should," "strategy," "target," or "will," and similar expressions are intended to identify such forwardlooking statements. The statements in this press release that are not historical statements, including statements 3

4 regarding Patterson-UTI's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond Patterson-UTI's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: volatility in customer spending and in oil and natural gas prices, which could adversely affect demand for Patterson-UTI's services and their associated effect on rates, utilization, margins and planned capital expenditures; global economic conditions; excess availability of land drilling rigs and pressure pumping equipment, including as a result of low commodity prices, reactivation or construction; liabilities from operations; weather; decline in, and ability to realize, backlog; equipment specialization and new technologies; shortages, delays in delivery and interruptions of supply of equipment and materials; ability to hire and retain personnel; loss of, or reduction in business with, key customers; difficulty with growth and in integrating acquisitions; governmental regulation; product liability; legal proceedings and actions by governmental or other regulatory agencies; political, economic and social instability risk; ability to effectively identify and enter new markets; cybersecurity risk; dependence on our subsidiaries to meet our longterm debt obligations; variable rate indebtedness risk; and anti-takeover measures in our charter documents. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in Patterson-UTI's SEC filings. Patterson-UTI's filings may be obtained by contacting Patterson-UTI or the SEC or through Patterson-UTI's website at or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at Patterson-UTI undertakes no obligation to publicly update or revise any forward-looking statement. PATTERSON-UTI ENERGY, INC. Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, REVENUES $ 787,334 $ 246,887 $ 2,356,684 $ 915,866 4

5 COSTS AND EXPENSES Direct operating costs 567, ,392 1,717, ,776 Depreciation, depletion, amortization and impairment 211, , , ,434 Selling, general and administrative 34,700 17, ,847 69,205 Merger and integration expenses 8,653 74,451 Other operating income, net (13,456) (4,038) (31,957) (14,323) Total costs and expenses 808, ,113 2,649,222 1,372,092 OPERATING LOSS (21,647) (113,226) (292,538) (456,226) OTHER INCOME (EXPENSE) Interest income , Interest expense (10,543) (8,644) (37,472) (40,366) Other Total other expense (9,709) (8,573) (35,263) (39,970) LOSS BEFORE INCOME TAXES (31,356) (121,799) (327,801) (496,196) INCOME TAX BENEFIT (226,758) (43,677) (333,711) (177,562) NET INCOME (LOSS) $ 195,402 $ (78,122) $ 5,910 $ (318,634) NET INCOME (LOSS) PER COMMON SHARE Basic $ 0.88 $ (0.53) $ 0.03 $ (2.18) Diluted $ 0.88 $ (0.53) $ 0.03 $ (2.18) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 219, , , ,178 Diluted 221, , , ,178 CASH DIVIDENDS PER COMMON SHARE $ 0.02 $ 0.02 $ 0.08 $

6 PATTERSON-UTI ENERGY, INC. Additional Financial and Operating Data (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended December 31, December 31, Contract Drilling: Revenues $ 309,580 $ 136,085 $ 1,040,033 $ 543,663 Direct operating costs $ 191,269 $ 86,586 $ 667,105 $ 305,804 Margin (1) $ 118,311 $ 49,499 $ 372,928 $ 237,859 Selling, general and administrative $ 1,428 $ 1,205 $ 5,934 $ 5,743 Depreciation, amortization and impairment $ 133,315 $ 110,821 $ 538,891 $ 467,974 Operating loss $ (16,432) $ (62,527) $ (171,897) $ (235,858) Operating days United States 14,638 6,113 49,751 22,975 Operating days Canada Operating days Total 14,776 6,288 50,427 23,596 Average revenue per operating day United States $ $ $ $ Average direct operating costs per operating day United States $ $ $ $ Average margin per operating day United States (1) $ 8.06 $ 7.91 $ 7.45 $ Average rigs operating United States Average revenue per operating day Canada $ $ $ $ Average direct operating costs per operating day Canada $ $ $ $ Average margin per operating day Canada (1) $ 2.33 $ 6.63 $ 3.50 $

7 Average rigs operating Canada Average revenue per operating day Total $ $ $ $ Average direct operating costs per operating day Total $ $ $ $ Average margin per operating day Total (1) $ 8.01 $ 7.87 $ 7.40 $ Average rigs operating Total Capital expenditures $ 131,999 $ 26,507 $ 354,425 $ 72,508 Pressure Pumping: Revenues $ 406,652 $ 105,642 $ 1,200,311 $ 354,070 Direct operating costs $ 323,607 $ 100,008 $ 966,835 $ 334,588 Margin (2) $ 83,045 $ 5,634 $ 233,476 $ 19,482 Selling, general and administrative $ 3,926 $ 2,394 $ 14,442 $ 11,238 Depreciation, amortization and impairment $ 56,677 $ 43,315 $ 198,006 $ 184,872 Operating income (loss) $ 22,442 $ (40,075) $ 21,028 $ (176,628) Fracturing jobs Other jobs , Total jobs ,884 1,151 Average revenue per fracturing job $ 2, $ $ 1, $ Average revenue per other job $ $ 8.98 $ $ Average revenue per total job $ $ $ $ Average costs per total job $ $ $ $ Average margin per total job (2) $ $ $ $ Margin as a percentage of revenues (2) 20.4 % 5.3 % 19.5 % 5.5 % Capital expenditures $ 86,013 $ 11,922 $ 171,436 $ 39,584 Directional Drilling: Revenues $ 45,580 $ $ 45,580 $ Direct operating costs $ 32,172 $ $ 32,172 $ 7

8 Margin (3) $ 13,408 $ $ 13,408 $ Selling, general and administrative $ 4,082 $ $ 4,082 $ Depreciation and amortization $ 9,347 $ $ 9,347 $ Operating loss $ (21) $ $ (21) $ Margin as a percentage of revenues (3) 29.4 % 29.4 % Capital expenditures $ 7,795 $ $ 7,795 $ Other Operations: Revenues $ 25,522 $ 5,160 $ 70,760 $ 18,133 Direct operating costs $ 20,882 $ 2,798 $ 51,428 $ 8,384 Margin (4) $ 4,640 $ 2,362 $ 19,332 $ 9,749 Selling, general and administrative $ 2,847 $ 1,769 $ 10,743 $ 3,026 Depreciation, depletion and impairment $ 9,576 $ 1,721 $ 29,402 $ 10,114 Operating loss $ (7,783) $ (1,128) $ (20,813) $ (3,391) Capital expenditures $ 10,531 $ 495 $ 31,547 $ 6,116 Corporate: Selling, general and administrative $ 22,417 $ 12,166 $ 70,646 $ 49,198 Merger and integration expenses $ 8,653 $ $ 74,451 $ Depreciation $ 2,239 $ 1,368 $ 7,695 $ 5,474 Other operating income, net $ (13,456) $ (4,038) $ (31,957) $ (14,323) Capital expenditures $ 898 $ 364 $ 1,884 $ 1,591 Total capital expenditures $ 237,236 $ 39,288 $ 567,087 $ 119,799 (1) For Contract Drilling, margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per operating day is defined as margin divided by operating days. (2) For Pressure Pumping, margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per total job is defined as margin divided by total jobs. Margin as a percentage of revenues is defined as margin divided by revenues. 8

9 (3) For Directional Drilling, margin is defined as revenues less direct operating costs and excludes depreciation and amortization and selling, general and administrative expenses. Margin as a percentage of revenues is defined as margin divided by revenues. (4) For Other Operations, margin is defined as revenues less direct operating costs and excludes depreciation, depletion and impairment and selling, general and administrative expenses. December 31, December 31, Selected Balance Sheet Data (unaudited, in thousands): Cash and cash equivalents $ 42,828 $ 35,152 Current assets $ 746,855 $ 246,882 Current liabilities $ 546,250 $ 264,815 Working capital $ 200,605 $ (17,933) Borrowings under revolving credit facility $ 268,000 $ Other long-term debt $ 598,783 $ 598,437 PATTERSON-UTI ENERGY, INC. Non-U.S. GAAP Financial Measures (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended December 31, December 31, Adjusted Earnings Before Interest, Taxes, Depreciation 9

10 and Amortization (Adjusted EBITDA)(1): Net income (loss) $ 195,402 $ (78,122) $ 5,910 $ (318,634) Income tax benefit (226,758) (43,677) (333,711) (177,562) Net interest expense 9,826 8,590 35,606 40,039 Depreciation, depletion, amortization and impairment 211, , , ,434 Adjusted EBITDA $ 189,624 $ 44,016 $ 491,146 $ 212,277 Total revenue $ 787,334 $ 246,887 $ 2,356,684 $ 915,866 Adjusted EBITDA margin 24.1 % 17.8 % 20.8 % 23.2 % Adjusted EBITDA by operating segment: Contract drilling $ 116,883 $ 48,294 $ 366,994 $ 232,116 Pressure pumping 79,119 3, ,034 8,244 Directional drilling 9,326 9,326 Other operations 1, ,589 6,723 Corporate (17,497) (8,111) (112,797) (34,806) Consolidated Adjusted EBITDA $ 189,624 $ 44,016 $ 491,146 $ 212,277 (1) Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is not defined by accounting principles generally accepted in the United States of America ("U.S. GAAP"). We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill). We present Adjusted EBITDA because we believe it provides to both management and investors additional information with respect to the performance of our fundamental business activities and a comparison of the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBTIDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be construed as an alternative to the U.S. GAAP measure of net income (loss). Our computations of Adjusted EBITDA may not be the same as similarly titled measures of other companies. 10

11 PATTERSON-UTI ENERGY, INC. Selected Costs and Expenses (unaudited, dollars and shares in thousands) Three Months Ended December 31, 2017 Pre-tax After-tax Per share Non-cash revaluation of deferred tax items from tax reform $ 218,651 $ 0.99 Merger and integration expenses $ (8,653) (6,416) (0.03) Gain on sale of certain oil and gas properties $ 8,417 6, $ 218,476 $ 0.98 Normalized effective tax rate % Weighted average number of common shares outstanding 219,843 Add dilutive effect of potential common shares 2,061 Weighted average number of diluted common shares outstanding 221,904 PATTERSON-UTI ENERGY, INC. Pro forma Net Loss per Share for the Three Months Ended December 31, 2017 (unaudited, in thousands, except per share data) Three Months Ended December 31, 2017 Net income as reported $ 195,402 Non-cash revaluation of deferred tax items from tax reform (218,651) After-tax merger and integration expenses 6,416 11

12 After-tax gain on sale of certain oil and gas properties (6,241) Pro-forma net loss without items $ (23,074) Weighted average number of common shares outstanding 219,843 Pro-forma net loss per share $ (0.10) PATTERSON-UTI ENERGY, INC. Pro forma Net Loss per Share for the Year Ended December 31, 2017 (unaudited, dollars and shares in thousands) Year Ended December 31, 2017 Net income as reported $ 5,910 Pretax merger and integration expenses 74,451 Pretax non-cash impairment charge 28,979 Pretax gain on sale of certain real estate and oil and gas interests (19,627) 83,803 Effective tax rate 35.1 % After-tax amount 54,388 Non-cash revaluation of deferred tax items from tax reform (218,651) Pro-forma net loss without items $ (158,353) Weighted average number of common shares outstanding 198,447 Pro-forma net loss per share $ (0.80) 12

13 PATTERSON-UTI ENERGY, INC. Effective Tax Rate Computation (unaudited, dollars in thousands) Three Months Ended December 31, 2017 Year Ended December 31, 2017 Loss before income taxes as reported $ (31,356) $ (327,801) Income tax benefit as reported $ (226,758) $ (333,711) Less: non-cash revaluation of deferred tax items from tax reform 218, ,651 Normalized income tax benefit $ (8,107) $ (115,060) Normalized effective tax rate % % PATTERSON-UTI ENERGY, INC. Contract Drilling Per Day Successive Quarters (unaudited, dollars in thousands) 2017 Fourth Quarter Third Quarter Contract drilling revenues $ 309,580 $ 301,614 13

14 Operating days - Total 14,776 14,841 Average revenue per operating day - Total $ $ Direct operating costs - Total $ 191,269 $ 186,957 Average direct operating costs per operating day - Total $ $ Average margin per operating day - Total $ 8.01 $ 7.73 PATTERSON-UTI ENERGY, INC. Pressure Pumping Margin and Adjusted EBITDA (unaudited, dollars in thousands) 2017 Fourth Quarter Third Quarter Pressure pumping revenues $ 406,652 $ 362,441 Direct operating costs 323, ,315 Margin 83,045 72,126 Selling, general and administrative 3,926 4,011 Adjusted EBITDA $ 79,119 $ 68,115 Margin as a percentage of revenues 20.4 % 19.9 % View original content: 14

15 SOURCE PATTERSON-UTI ENERGY, INC. Mike Drickamer, Vice President, Investor Relations, (281)